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Celo is a fast, mobile-first full-EVM compatible PoS chain with ultralight sync mode and stablecoin stability protocols. It has a range of tools to lower the barriers for developers to build applications on the Celo blockchain, with the hope of creating an efficient, low-cost, decentralized social payment system on a global scale.
Celo targets smartphone users, starting in third-world and developing countries with immature payment network infrastructures and fragile monetary systems and gradually leading them to its own Defi ecosystem. However, the existing Celo Defi ecosystem is lacking innovations and incentives which greatly impedes user experience and user retention.
Celo has a strong team, abundant resources and top-tier investors’ backings. Recently, with the establishment of an ecosystem fund as well as the Make Crypto Mobile Hackathon, Celo has gained more public exposure and expanded its community. Due to its unique protocol design, Celo has many pathways to becoming a successful layer 1 platform. It could compete with other EMV-compatible layer 1 platforms e.g. Avalanche, Fantom, as well as grab its share in the market for decentralized money and payment systems, e.g. Terra. However, this flexibility may in turn hinder Celo’s growth, reflected in its falling behind in terms of TVL and trade volume compared to its competitors.
Celo’s growth strategy is threefold. First, Celo is providing more use cases for its stablecoin in the real world with the vision of enabling prosperity for all. Charity platform ImpactMarket, carbon credit solution Moss, as well as fundraising platform Doni all use the Celo blockchain as the underlying payment infrastructure. Second, it is building up its own Defi Legos with the $100 million defi for the people fund as its arsenal. Celo incubates its native projects, attracts innovative ideas through hackathons as well as partners with top defi protocols on other chains. The third strategy is cross-chain collaboration. It is integrating with more cross-chain solutions to bridge to other blockchains that are not limited to EVM-compatible ones. In the future, Celo will work with OrbitChain to connect to IBC on the Cosmos ecosystem, with Wrapped to connect to Stacks, Kadena, and with Allbridge to connect to Near, etc.
Celo’s blockchain is based on go-ethereum, the Go implementation of the Ethereum protocol. It uses the Istanbul, or IBFT consensus protocol with a proof-of-stake (PoS) mechanism that determines which nodes become active validators and how incentives are arranged to secure the network. Currently, it has a max cap of 100 active validators that could be changed through governance proposals. It has an average block time of 5 seconds.
In addition to the full, fast, and light sync modes supported by Ethereum, Celo also supports ultralight sync mode. Ultralight nodes compute and verify the validator set for the current epoch by downloading the last header of each previous epoch.
Simply put, Celo’s stablecoin stability mechanism is a combination of cross-chain overcollateralized reserve and algorithm.
A basket of crypto reserve assets including BTC, ETH, DAI as well as natural capital backed assets such as carbon credit tokens. According to Celoreserve.org, the current total reserve is around $900M with a reserve ratio of 5.5x, out of which 64% is CELO.
Celo maintains it’s stablecoin peg through supply and demand dynamics of its reserve asset CELO;
Arbitrage is achieved through the Mento protocol and large-scale exchange of CELO assets is done through the Granda Mento protocol to ensure lower slippage;
Three mechanisms are used to ensure that the reserve pool is adequately funded:
-When the reserve ratio falls below the threshold, Celo’s block rewards will be distributed to the reserve pool to replenish the reserves;
-A certain portion of the transaction fees could be extracted to replenish the reserves (not currently enabled);
-A fee is charged in the Mento protocol to replenish the reserves.
cEUR went live on June 21 and Celo plans to launch other stablecoins such as cYen and cReal in the future.
Terra’s stabilization mechanism
TerraUSD (UST), in contrast, is an algorithmic stablecoin that is purely backed by LUNA and does not have a reserve pool. The stabilization mechanism is the supply and demand relationship between the stablecoins and LUNA. UST’s ability to maintain peg has gone through a couple of stress testings as market crashes, and its continuous return to peg price offers empirical proof that the stabilization mechanism actually works, which gained significant community recognition. The success of Terra suggests that the key to an algorithmic stablecoin maintaining its peg is not how innovative the stabilization mechanism is, but how strong the overall ecosystem is, i.e. how many use cases exist for the algorithmic stablecoin. As the market recognizes that algorithmic stablecoins actually works, Do Kwon is also planning to add crypto reserves to back the UST price, which will further boost the confidence and consensus among its stablecoin users.
Celo has a strong team background and investor line-up, which has been summarized well in Mint Ventures’s recent Celo report[1]. The key takeaways are
Founders have excellent academic backgrounds and successful Web2 entrepreneurial experience.
Other partners are from top traditional financial and consulting firms.
The team size is large, with around 130 employees in total. A majority of them are based in the US and have Ivy league academic backgrounds. Among them, 50% are engineers and 30% in business development.
Top tier investors include famous VCs such as a16z, Polychain Capital, and well-known entrepreneurs such as Jack Dorsey, the founder of Twitter.
The majority of existing projects in the Celo ecosystem are cross-chain protocols that started on Ethereum, while only a handful of projects that are being built natively on Celo.
TVL — Defillama
According to Defillama, among the top 10 projects by TVL, there are only four native protocols- Mento, Moola, Ubeswap, and Mobius.
Defi Fund
Celo announced in September that the $100 million Defi for The People Defi Eco Fund would be used to facilitate its Defi ecosystem development, including partnerships with top Defi protocols such as Curve, Aave, Sushiswap as well as the hosting hackathons (the first round of hackathons with a total prize of $2.5M was held from October 8 to November 28). However, a few issues also arise. For example, Aave has yet to implement its lending protocol on Celo, falling behind Avalanche.
The first Hackathon has many prize pools that are not limited to defi, including nft/games, infrastructure dapps, payment facilities, etc., with an average reward of $20k, $7k, $3k for top 3 projects, respectively. Prize pools based on geographic areas also exist, including Latin America, Africa, Brazil, India and Asia Pacific, further demonstrating Celo’s emphasis on increasing adoption in third world and developing countries as its growth strategy.
Celo’s vision is to build a financial system for 6 billion smartphone users. Therefore, wallet apps are a core infrastructure, which greatly impact users’ loyalty and retention.
Celo’s strategy in developing its wallets mainly goes two ways. One is to take advantage of the full EVM-compatibility and enable users to use familiar and popular wallets such as MetaMask, Ledger, etc. This would also attract crypto native users to join the Celo ecosystem easily. Another is to develop native wallets and open up the markets in the real world, where a wider range of non-crypto users could join the ecosystem through its wallet apps. Main products include Valora, Abra and Opera.
Valora
As an advocate of mobile-first blockchain, Celo has developed the Valora wallet app, which features a mobile phone number bundled with a PublicKey that allows users to pay directly using the phone number as an address, as shown in the following image.
Valora offers apps on Android and iOS, some functions and features include
Register a new account by
-Creating a new SEED PHRASE, or
-Importing seed
Verify phone number (optional)
-Bundle your phone number with your address (public key)
Buy cryptocurrencies
-No native on/off ramp fiat gateway
-Partnership with Moonpay, Simplex, and Transak
-Higher fees, from 3% to 10%
-Cumbersome process as a result of partner fiat gateways. E.g. Simplex requires information including credit card, address, email verification, etc.
-Deters fee sensitive users as well as
Send/Receive cryptocurrency
-Integrating contacts in your smartphone
Modify or unbundle your phone number
Pros and Cons of Bundling Phone Number with an Address
Potential Risks
There are two main risks with the feature of bundling public keys with phone numbers. First, the confidentiality of sensitive personal information tied to the public key, if compromised, may expose users to phishing attacks. Second, treats and competition from name services, e.g. ENS on Ethereum. With the rise of name service protocols such as ENS and DAS, the edge of using phone numbers to pay and receive cryptos offered by Celo would be weakened. Afterall, phone numbers are not as memorable as words, just as the Internet has transitioned from IP addresses to domain names. Nevertheless, Celo could launch its own domain name system as a complement.
Ubeswap (https://ubeswap.org/) is the native DEX developed by Celo. Current TVL is around $40M, with an all-time high of $80M due to liquidity mining incentives. The average trading volume for the past week is around $4M, which is down significantly compared to average volume in October but slightly higher than that in September.
The migration of liquidity
It can be observed that when Ubiswap offered additional mining incentives in September, TVL improved significantly, peaking in October but then dropping by half. Rapid migration of liquidity is a pain for many protocols and public blockchains. EVM full compatibility has its huge advantages. It can attract a large number of existing Solidity developers to build on the platform, as well as bridging assets and liquidity easily across different EVM blockchains with increasingly mature cross-chain solutions. But this comes with a price, when the reward or APY is no longer that attractive compared to other ecosystems and there are not many useful products to retain the users, liquidity would migrate to other blockchains without hesitation. Therefore, liquidity gained from liquidity mining incentives are only a reflection of profit chasing in the short run rather than capture of long-term loyal users.
Come for the APY, Stay for the product
As a full EVM compatible blockchain, Celo has a starting advantage to attract a wider range of developers. But sustainable long-term growth requires competing edges which translate into innovative ideas as well as top-tier developers who could turn these ideas into working products. Simply forking Uniswap and Aave codes onto Celo is not enough, as crypto users are increasingly dependent on these basic defi protocols and regarding them as essential. Fundamental protocols like these are necessary building blocks in the defi money lego and should not be considered the ultimate feature that attracts and even retains users. Therefore, the emphasis should be put on providing more use cases for its stablecoins such that a strong internal demand could be accumulated and a virtuous cycle is created. More users are attracted into the ecosystem and retained, whether they are users in the traditional world or crypto native users from other blockchains.
In contrast, Terra’s success as a stablecoin blockchain is due to its strong use cases for its UST which creates strong demand, both internally and externally. It starts with a very basic DEX, terraswap, to meet the demands of swapping stablecoins and LUNA. The blockchain and its stablecoin also serve as the core payment infrastructure for many e-Commerce businesses in South Korea. The stellar growth of Terra began with the launch of two very innovative protocols, Mirror and Anchor, meeting the needs of a lot of users in terms of investing and saving, respectively. When Mirror was introduced, a large number of crypto native users as well as new users rushed into the ecosystem due to its very high liquidity mining APY and relatively low impermanent loss because the lp assets are synthetic US stocks. However, the product itself offers an additional UST use case — investing in synthetic assets. It offers solutions to investing in high-quality assets that are otherwise inaccessible. It also serves as a way to diversify and hedge crypto assets using synthetic traditional assets. Moreover, it makes shorting these assets easier. The takeaway is that even when the liquidity mining incentives are no longer attractive, there would still be users using the protocol due to its innovative solutions. With the introduction of Anchor, an innovative savings protocol that offers insanely high fixed 20% stablecoin yield, original users are retained and more users are attracted into the Terra ecosystem.
Moola(https://moola.market/) is the lending and borrowing protocol developed by Celo. The protocol is underutilized as indicated by its low TVL, small user base and low LTV. In IV. Competitors, we would take a closer look at the protocol in comparison with top lending protocols on its competitor blockchains.
Apart from the official bridge Optics developed by Celo, there are many other cross-chain solutions that are developed to connect Celo to various other EVM and non-EVM blockchains. These include Orbit Chain, Wrapped, Allbridge, etc.
Celo’s main competitors include rising EVM blockchains such as Avalanche and Fantom, as well as stablecoin blockchain Terra.
FTM is the best performing asset year to date, with more than 12,000% return. LUNA and AVAX follow with around 5500% return and 2700% return, respectively. CELO falls behind significantly with only 100% return, underperforming the overall crypto market.
Key fundamentals are summarized in the following table. We can make some interesting observations
Avalanche is growing fastest recently with the highest market cap, TVL as well as fees; But Avalanche also has the highest FDV/TVL ratio, followed by Celo surprisingly. Fantom has great potential in terms of price performance indicated by its very low FDV/TVL ratio.
Terra has over 3.1M wallet addresses, followed by Celo, Fantom and Avalanche. Surprisingly Avalanche has the smallest wallet addresses and Celo has a large user base, which is counterintuitive judging from other metrics such as TVL and volume.
Average daily number of transactions are not that disparate like other metrics between these EVM blockchains in the past week. Fantom leads with around 700k transactions daily which is 14% more than Avalanche and 29% more than Celo.
[2]EVM C-Chain
[3]Block explorers in Terra lack these key statistics.
[4]Average tx cost = 0.0075 CELO, CELO=$5, average daily transaction = 520k
DEX
We compare the statistics of top DEXs on each blockchain. Apart from the basic trading volume and TVL stats, we look at the specific composition of assets in TVL as a way to identify the reason behind the rise of these blockchains, and to see the level of cross-chain activity by looking at the percentage of wrapped tokens in TVL. The takeaways are
The hype for ‘Defi 2.0’ such as OHM forks and MIM. Around 28% of liquidity on TraderJoe is provided for $TIME, a fork of OHM and $MIM, the magic internet money minted by Abracadabra.Money. Similarly on Fantom, around 20% of liquidity is provided for $TOMB, a fork of Basis.Cash and $SPA, a fork of OHM.
The percentages of wrapped tokens on top DEX of the three EVM chains are close, ranging from 9% to 13%. But on Terraswap, only 0.7% of TVL are wrapped tokens (mainly wrapped stETH from Lido).
Only 23% of the circulating CELO is provided as liquidity on DEX, compared to around 43% for other EVM chains.
Lending/Borrowing
We compare the statistics of top lending and borrowing protocols on each blockchain. Currently 9m CELO, accounting for only 2.5% of the circulation supply, are deposited on Moola, the top lending protocol on Celo. It reflects that the majority of Celo holders are not involved in the defi ecosystem. The total number of participating users is about 7,000, with a per capita deposit of 11k and borrowing of 1.3k. The protocol LTV is 12.5%, suggesting a low demand for liquidity and a lack of use cases, even though the interest rate on borrowing is only 5%. The low protocol LTV is also caused by the low supply of cUSDs deposits as the utilization rate has already reached 58%. The low supply of stablecoins could be explained by the very low deposit APY at 1.6%. Therefore, Moola only provides a basic lending and liquidity solution for Celo assets. When there are no attractive deposit/borrowing incentives, and no use cases for leveraged liquidity, the growth of the protocol as well as the whole ecosystem is hindered.
On Avalanche, there are three major lending protocols which all have a significant amount of TVL. Combined TVL on all three protocols surpass 10B with more than 10% of the cuculating AVAX being provided as collateral. Regardless of whether there are incentives for borrowing and lending, the protocols have very high LTVs and capital utilization rates.
Currently 65.7M LUNA, accounting for 16% of the circulation supply, are deposited on Anchor, the lending protocol on Terra. The 34% protocol LTV is thanks to the high borrowing incentives (up to 25% reward in $ANC) which makes net borrowing interest rate close to zero. The 20% saving rates on stablecoin UST also attract a significant amount of deposits, amounting to $2 billion, to fully meet the needs of borrower liquidity. Total borrow reaches $1.2 billion, with a capital utilization rate of about 60%, which is the liquidation ratio set by the protocol.
Celo holders also appear to be under-engaged in the ecosystem, with only 5.67% circulating supply is staked, even though Celo has a 13.23% staking return (10.55% after adjusting for inflation). The unbonding period is only three days. This may reflect the lack of confidence of holders in the long-term growth of the ecosystem. Both AVAX and FTM have a staking participation rate of more than 60%. With around 10% of circulating supply being deposited as collateral in lending protocols, more than 70% of the circulating supply is staked inside their own ecosystem. In terms of Terra, the unbonding period is 21 days and the staking reward is 4.18%. Staked tokens account for 35.12% of the circulating supply. Adding the additional 16% deposited in the Anchor protocol, more than 51% of the circulating supply is locked in Terra’s own ecosystem, which shows strong internal demand and user’s confidence in the long-term growth of the ecosystem.
According to OutlierVentures’s Blockchain Development Trends Report[5], both Avalanche and Terra experienced significant growth in development activity, approaching 709.7% and 186.6% in the past year in terms of total commits. In contrast, Celo has only grown 18.6%.
Celo is faced with many challenges and opportunities. As most employees are based in the United States, Celo would face more regulatory pressure as a stablecoin blockchain. But its US resources and connections might help Celo meet compliance more easily. It has a large team to develop and expand its ecosystem. But this may also come with organization and coordination issues. Its development speed is slow compared to its competitors. Its rollout of the ecosystem fund and hackathon events are also behind its competitors. It also faces competition from other more advanced EMV-compatible platforms, as well as stablecoin blockchains and protocols.
Nevertheless, Celo has many innate advantages. It is a highly scalable, low cost blockchain, which meets the requirements for a payment infrastructure that targets 6 billion smartphone users. It is fully EMV-compatible and offers easy-to-use tools to attract a wider range of developers to build on the platform. Celo has a very well developed mobile payment infrastructure. Combined with Celo’s unique phone-number-as-public-key design, it boasts a large user base of over 1.5 million wallets, with the potential to bring in millions of more users.
Celo has a very noble vision which is to enable prosperity for all through its advanced technology. Its active engagement in fighting inequality, climate change and other causes help Celo receive much reputation and recognition, especially in third world countries. These values that Celo embraces are inline with mainstream opinions which helps promotion and adoption. Celo is falling behind in terms of its development of defi, but it has a solid underlying payment infrastructure. And the race to become the decentralized money everyone uses either in the crypto world or in the real world is a marathon. It would be years before we use blockchain-based technology to take care of daily shoppings and financial activities. Celo has the resources and time to catch up and the reward for success is unimaginable.
[2]EVM C-Chain
[3]Block explorers in Terra lack these key statistics.
[4]Average tx cost = 0.0075 CELO, CELO=$5, average daily transaction = 520k
[5]https://outlierventures.io/wp-content/uploads/2021/09/Blockchain-Trend-Report-Q2-20-21.pdf
https://medium.com/celoorg/a-look-at-the-celo-whitepaper-c0061118ffd4
https://info.pangolin.exchange/#/home
https://info.spookyswap.finance/home
https://alpac4.com/TerraSwapDashboard/
https://analytics.traderjoexyz.com/
***
Disclosure: SevenX Ventures has not invested in Celo, Avalanche, Fantom or Terra. The researcher holds positions in Terra and Fantom. This statement is intended to disclose any conflict of interest and should not be misconstrued as a recommendation to purchase any token. This content is for informational purposes only and you should not make decisions based solely on it. This is not financial advice.
Data is collected on date Nov 26. 2021
Powered by SevenX Ventures
Author: Luke Wang//Twitter@LukeWasm
Welcome to point out any mistakes or typos or missed references
Celo is a fast, mobile-first full-EVM compatible PoS chain with ultralight sync mode and stablecoin stability protocols. It has a range of tools to lower the barriers for developers to build applications on the Celo blockchain, with the hope of creating an efficient, low-cost, decentralized social payment system on a global scale.
Celo targets smartphone users, starting in third-world and developing countries with immature payment network infrastructures and fragile monetary systems and gradually leading them to its own Defi ecosystem. However, the existing Celo Defi ecosystem is lacking innovations and incentives which greatly impedes user experience and user retention.
Celo has a strong team, abundant resources and top-tier investors’ backings. Recently, with the establishment of an ecosystem fund as well as the Make Crypto Mobile Hackathon, Celo has gained more public exposure and expanded its community. Due to its unique protocol design, Celo has many pathways to becoming a successful layer 1 platform. It could compete with other EMV-compatible layer 1 platforms e.g. Avalanche, Fantom, as well as grab its share in the market for decentralized money and payment systems, e.g. Terra. However, this flexibility may in turn hinder Celo’s growth, reflected in its falling behind in terms of TVL and trade volume compared to its competitors.
Celo’s growth strategy is threefold. First, Celo is providing more use cases for its stablecoin in the real world with the vision of enabling prosperity for all. Charity platform ImpactMarket, carbon credit solution Moss, as well as fundraising platform Doni all use the Celo blockchain as the underlying payment infrastructure. Second, it is building up its own Defi Legos with the $100 million defi for the people fund as its arsenal. Celo incubates its native projects, attracts innovative ideas through hackathons as well as partners with top defi protocols on other chains. The third strategy is cross-chain collaboration. It is integrating with more cross-chain solutions to bridge to other blockchains that are not limited to EVM-compatible ones. In the future, Celo will work with OrbitChain to connect to IBC on the Cosmos ecosystem, with Wrapped to connect to Stacks, Kadena, and with Allbridge to connect to Near, etc.
Celo’s blockchain is based on go-ethereum, the Go implementation of the Ethereum protocol. It uses the Istanbul, or IBFT consensus protocol with a proof-of-stake (PoS) mechanism that determines which nodes become active validators and how incentives are arranged to secure the network. Currently, it has a max cap of 100 active validators that could be changed through governance proposals. It has an average block time of 5 seconds.
In addition to the full, fast, and light sync modes supported by Ethereum, Celo also supports ultralight sync mode. Ultralight nodes compute and verify the validator set for the current epoch by downloading the last header of each previous epoch.
Simply put, Celo’s stablecoin stability mechanism is a combination of cross-chain overcollateralized reserve and algorithm.
A basket of crypto reserve assets including BTC, ETH, DAI as well as natural capital backed assets such as carbon credit tokens. According to Celoreserve.org, the current total reserve is around $900M with a reserve ratio of 5.5x, out of which 64% is CELO.
Celo maintains it’s stablecoin peg through supply and demand dynamics of its reserve asset CELO;
Arbitrage is achieved through the Mento protocol and large-scale exchange of CELO assets is done through the Granda Mento protocol to ensure lower slippage;
Three mechanisms are used to ensure that the reserve pool is adequately funded:
-When the reserve ratio falls below the threshold, Celo’s block rewards will be distributed to the reserve pool to replenish the reserves;
-A certain portion of the transaction fees could be extracted to replenish the reserves (not currently enabled);
-A fee is charged in the Mento protocol to replenish the reserves.
cEUR went live on June 21 and Celo plans to launch other stablecoins such as cYen and cReal in the future.
Terra’s stabilization mechanism
TerraUSD (UST), in contrast, is an algorithmic stablecoin that is purely backed by LUNA and does not have a reserve pool. The stabilization mechanism is the supply and demand relationship between the stablecoins and LUNA. UST’s ability to maintain peg has gone through a couple of stress testings as market crashes, and its continuous return to peg price offers empirical proof that the stabilization mechanism actually works, which gained significant community recognition. The success of Terra suggests that the key to an algorithmic stablecoin maintaining its peg is not how innovative the stabilization mechanism is, but how strong the overall ecosystem is, i.e. how many use cases exist for the algorithmic stablecoin. As the market recognizes that algorithmic stablecoins actually works, Do Kwon is also planning to add crypto reserves to back the UST price, which will further boost the confidence and consensus among its stablecoin users.
Celo has a strong team background and investor line-up, which has been summarized well in Mint Ventures’s recent Celo report[1]. The key takeaways are
Founders have excellent academic backgrounds and successful Web2 entrepreneurial experience.
Other partners are from top traditional financial and consulting firms.
The team size is large, with around 130 employees in total. A majority of them are based in the US and have Ivy league academic backgrounds. Among them, 50% are engineers and 30% in business development.
Top tier investors include famous VCs such as a16z, Polychain Capital, and well-known entrepreneurs such as Jack Dorsey, the founder of Twitter.
The majority of existing projects in the Celo ecosystem are cross-chain protocols that started on Ethereum, while only a handful of projects that are being built natively on Celo.
TVL — Defillama
According to Defillama, among the top 10 projects by TVL, there are only four native protocols- Mento, Moola, Ubeswap, and Mobius.
Defi Fund
Celo announced in September that the $100 million Defi for The People Defi Eco Fund would be used to facilitate its Defi ecosystem development, including partnerships with top Defi protocols such as Curve, Aave, Sushiswap as well as the hosting hackathons (the first round of hackathons with a total prize of $2.5M was held from October 8 to November 28). However, a few issues also arise. For example, Aave has yet to implement its lending protocol on Celo, falling behind Avalanche.
The first Hackathon has many prize pools that are not limited to defi, including nft/games, infrastructure dapps, payment facilities, etc., with an average reward of $20k, $7k, $3k for top 3 projects, respectively. Prize pools based on geographic areas also exist, including Latin America, Africa, Brazil, India and Asia Pacific, further demonstrating Celo’s emphasis on increasing adoption in third world and developing countries as its growth strategy.
Celo’s vision is to build a financial system for 6 billion smartphone users. Therefore, wallet apps are a core infrastructure, which greatly impact users’ loyalty and retention.
Celo’s strategy in developing its wallets mainly goes two ways. One is to take advantage of the full EVM-compatibility and enable users to use familiar and popular wallets such as MetaMask, Ledger, etc. This would also attract crypto native users to join the Celo ecosystem easily. Another is to develop native wallets and open up the markets in the real world, where a wider range of non-crypto users could join the ecosystem through its wallet apps. Main products include Valora, Abra and Opera.
Valora
As an advocate of mobile-first blockchain, Celo has developed the Valora wallet app, which features a mobile phone number bundled with a PublicKey that allows users to pay directly using the phone number as an address, as shown in the following image.
Valora offers apps on Android and iOS, some functions and features include
Register a new account by
-Creating a new SEED PHRASE, or
-Importing seed
Verify phone number (optional)
-Bundle your phone number with your address (public key)
Buy cryptocurrencies
-No native on/off ramp fiat gateway
-Partnership with Moonpay, Simplex, and Transak
-Higher fees, from 3% to 10%
-Cumbersome process as a result of partner fiat gateways. E.g. Simplex requires information including credit card, address, email verification, etc.
-Deters fee sensitive users as well as
Send/Receive cryptocurrency
-Integrating contacts in your smartphone
Modify or unbundle your phone number
Pros and Cons of Bundling Phone Number with an Address
Potential Risks
There are two main risks with the feature of bundling public keys with phone numbers. First, the confidentiality of sensitive personal information tied to the public key, if compromised, may expose users to phishing attacks. Second, treats and competition from name services, e.g. ENS on Ethereum. With the rise of name service protocols such as ENS and DAS, the edge of using phone numbers to pay and receive cryptos offered by Celo would be weakened. Afterall, phone numbers are not as memorable as words, just as the Internet has transitioned from IP addresses to domain names. Nevertheless, Celo could launch its own domain name system as a complement.
Ubeswap (https://ubeswap.org/) is the native DEX developed by Celo. Current TVL is around $40M, with an all-time high of $80M due to liquidity mining incentives. The average trading volume for the past week is around $4M, which is down significantly compared to average volume in October but slightly higher than that in September.
The migration of liquidity
It can be observed that when Ubiswap offered additional mining incentives in September, TVL improved significantly, peaking in October but then dropping by half. Rapid migration of liquidity is a pain for many protocols and public blockchains. EVM full compatibility has its huge advantages. It can attract a large number of existing Solidity developers to build on the platform, as well as bridging assets and liquidity easily across different EVM blockchains with increasingly mature cross-chain solutions. But this comes with a price, when the reward or APY is no longer that attractive compared to other ecosystems and there are not many useful products to retain the users, liquidity would migrate to other blockchains without hesitation. Therefore, liquidity gained from liquidity mining incentives are only a reflection of profit chasing in the short run rather than capture of long-term loyal users.
Come for the APY, Stay for the product
As a full EVM compatible blockchain, Celo has a starting advantage to attract a wider range of developers. But sustainable long-term growth requires competing edges which translate into innovative ideas as well as top-tier developers who could turn these ideas into working products. Simply forking Uniswap and Aave codes onto Celo is not enough, as crypto users are increasingly dependent on these basic defi protocols and regarding them as essential. Fundamental protocols like these are necessary building blocks in the defi money lego and should not be considered the ultimate feature that attracts and even retains users. Therefore, the emphasis should be put on providing more use cases for its stablecoins such that a strong internal demand could be accumulated and a virtuous cycle is created. More users are attracted into the ecosystem and retained, whether they are users in the traditional world or crypto native users from other blockchains.
In contrast, Terra’s success as a stablecoin blockchain is due to its strong use cases for its UST which creates strong demand, both internally and externally. It starts with a very basic DEX, terraswap, to meet the demands of swapping stablecoins and LUNA. The blockchain and its stablecoin also serve as the core payment infrastructure for many e-Commerce businesses in South Korea. The stellar growth of Terra began with the launch of two very innovative protocols, Mirror and Anchor, meeting the needs of a lot of users in terms of investing and saving, respectively. When Mirror was introduced, a large number of crypto native users as well as new users rushed into the ecosystem due to its very high liquidity mining APY and relatively low impermanent loss because the lp assets are synthetic US stocks. However, the product itself offers an additional UST use case — investing in synthetic assets. It offers solutions to investing in high-quality assets that are otherwise inaccessible. It also serves as a way to diversify and hedge crypto assets using synthetic traditional assets. Moreover, it makes shorting these assets easier. The takeaway is that even when the liquidity mining incentives are no longer attractive, there would still be users using the protocol due to its innovative solutions. With the introduction of Anchor, an innovative savings protocol that offers insanely high fixed 20% stablecoin yield, original users are retained and more users are attracted into the Terra ecosystem.
Moola(https://moola.market/) is the lending and borrowing protocol developed by Celo. The protocol is underutilized as indicated by its low TVL, small user base and low LTV. In IV. Competitors, we would take a closer look at the protocol in comparison with top lending protocols on its competitor blockchains.
Apart from the official bridge Optics developed by Celo, there are many other cross-chain solutions that are developed to connect Celo to various other EVM and non-EVM blockchains. These include Orbit Chain, Wrapped, Allbridge, etc.
Celo’s main competitors include rising EVM blockchains such as Avalanche and Fantom, as well as stablecoin blockchain Terra.
FTM is the best performing asset year to date, with more than 12,000% return. LUNA and AVAX follow with around 5500% return and 2700% return, respectively. CELO falls behind significantly with only 100% return, underperforming the overall crypto market.
Key fundamentals are summarized in the following table. We can make some interesting observations
Avalanche is growing fastest recently with the highest market cap, TVL as well as fees; But Avalanche also has the highest FDV/TVL ratio, followed by Celo surprisingly. Fantom has great potential in terms of price performance indicated by its very low FDV/TVL ratio.
Terra has over 3.1M wallet addresses, followed by Celo, Fantom and Avalanche. Surprisingly Avalanche has the smallest wallet addresses and Celo has a large user base, which is counterintuitive judging from other metrics such as TVL and volume.
Average daily number of transactions are not that disparate like other metrics between these EVM blockchains in the past week. Fantom leads with around 700k transactions daily which is 14% more than Avalanche and 29% more than Celo.
[2]EVM C-Chain
[3]Block explorers in Terra lack these key statistics.
[4]Average tx cost = 0.0075 CELO, CELO=$5, average daily transaction = 520k
DEX
We compare the statistics of top DEXs on each blockchain. Apart from the basic trading volume and TVL stats, we look at the specific composition of assets in TVL as a way to identify the reason behind the rise of these blockchains, and to see the level of cross-chain activity by looking at the percentage of wrapped tokens in TVL. The takeaways are
The hype for ‘Defi 2.0’ such as OHM forks and MIM. Around 28% of liquidity on TraderJoe is provided for $TIME, a fork of OHM and $MIM, the magic internet money minted by Abracadabra.Money. Similarly on Fantom, around 20% of liquidity is provided for $TOMB, a fork of Basis.Cash and $SPA, a fork of OHM.
The percentages of wrapped tokens on top DEX of the three EVM chains are close, ranging from 9% to 13%. But on Terraswap, only 0.7% of TVL are wrapped tokens (mainly wrapped stETH from Lido).
Only 23% of the circulating CELO is provided as liquidity on DEX, compared to around 43% for other EVM chains.
Lending/Borrowing
We compare the statistics of top lending and borrowing protocols on each blockchain. Currently 9m CELO, accounting for only 2.5% of the circulation supply, are deposited on Moola, the top lending protocol on Celo. It reflects that the majority of Celo holders are not involved in the defi ecosystem. The total number of participating users is about 7,000, with a per capita deposit of 11k and borrowing of 1.3k. The protocol LTV is 12.5%, suggesting a low demand for liquidity and a lack of use cases, even though the interest rate on borrowing is only 5%. The low protocol LTV is also caused by the low supply of cUSDs deposits as the utilization rate has already reached 58%. The low supply of stablecoins could be explained by the very low deposit APY at 1.6%. Therefore, Moola only provides a basic lending and liquidity solution for Celo assets. When there are no attractive deposit/borrowing incentives, and no use cases for leveraged liquidity, the growth of the protocol as well as the whole ecosystem is hindered.
On Avalanche, there are three major lending protocols which all have a significant amount of TVL. Combined TVL on all three protocols surpass 10B with more than 10% of the cuculating AVAX being provided as collateral. Regardless of whether there are incentives for borrowing and lending, the protocols have very high LTVs and capital utilization rates.
Currently 65.7M LUNA, accounting for 16% of the circulation supply, are deposited on Anchor, the lending protocol on Terra. The 34% protocol LTV is thanks to the high borrowing incentives (up to 25% reward in $ANC) which makes net borrowing interest rate close to zero. The 20% saving rates on stablecoin UST also attract a significant amount of deposits, amounting to $2 billion, to fully meet the needs of borrower liquidity. Total borrow reaches $1.2 billion, with a capital utilization rate of about 60%, which is the liquidation ratio set by the protocol.
Celo holders also appear to be under-engaged in the ecosystem, with only 5.67% circulating supply is staked, even though Celo has a 13.23% staking return (10.55% after adjusting for inflation). The unbonding period is only three days. This may reflect the lack of confidence of holders in the long-term growth of the ecosystem. Both AVAX and FTM have a staking participation rate of more than 60%. With around 10% of circulating supply being deposited as collateral in lending protocols, more than 70% of the circulating supply is staked inside their own ecosystem. In terms of Terra, the unbonding period is 21 days and the staking reward is 4.18%. Staked tokens account for 35.12% of the circulating supply. Adding the additional 16% deposited in the Anchor protocol, more than 51% of the circulating supply is locked in Terra’s own ecosystem, which shows strong internal demand and user’s confidence in the long-term growth of the ecosystem.
According to OutlierVentures’s Blockchain Development Trends Report[5], both Avalanche and Terra experienced significant growth in development activity, approaching 709.7% and 186.6% in the past year in terms of total commits. In contrast, Celo has only grown 18.6%.
Celo is faced with many challenges and opportunities. As most employees are based in the United States, Celo would face more regulatory pressure as a stablecoin blockchain. But its US resources and connections might help Celo meet compliance more easily. It has a large team to develop and expand its ecosystem. But this may also come with organization and coordination issues. Its development speed is slow compared to its competitors. Its rollout of the ecosystem fund and hackathon events are also behind its competitors. It also faces competition from other more advanced EMV-compatible platforms, as well as stablecoin blockchains and protocols.
Nevertheless, Celo has many innate advantages. It is a highly scalable, low cost blockchain, which meets the requirements for a payment infrastructure that targets 6 billion smartphone users. It is fully EMV-compatible and offers easy-to-use tools to attract a wider range of developers to build on the platform. Celo has a very well developed mobile payment infrastructure. Combined with Celo’s unique phone-number-as-public-key design, it boasts a large user base of over 1.5 million wallets, with the potential to bring in millions of more users.
Celo has a very noble vision which is to enable prosperity for all through its advanced technology. Its active engagement in fighting inequality, climate change and other causes help Celo receive much reputation and recognition, especially in third world countries. These values that Celo embraces are inline with mainstream opinions which helps promotion and adoption. Celo is falling behind in terms of its development of defi, but it has a solid underlying payment infrastructure. And the race to become the decentralized money everyone uses either in the crypto world or in the real world is a marathon. It would be years before we use blockchain-based technology to take care of daily shoppings and financial activities. Celo has the resources and time to catch up and the reward for success is unimaginable.
[2]EVM C-Chain
[3]Block explorers in Terra lack these key statistics.
[4]Average tx cost = 0.0075 CELO, CELO=$5, average daily transaction = 520k
[5]https://outlierventures.io/wp-content/uploads/2021/09/Blockchain-Trend-Report-Q2-20-21.pdf
https://medium.com/celoorg/a-look-at-the-celo-whitepaper-c0061118ffd4
https://info.pangolin.exchange/#/home
https://info.spookyswap.finance/home
https://alpac4.com/TerraSwapDashboard/
https://analytics.traderjoexyz.com/
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Disclosure: SevenX Ventures has not invested in Celo, Avalanche, Fantom or Terra. The researcher holds positions in Terra and Fantom. This statement is intended to disclose any conflict of interest and should not be misconstrued as a recommendation to purchase any token. This content is for informational purposes only and you should not make decisions based solely on it. This is not financial advice.
Data is collected on date Nov 26. 2021
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Author: Luke Wang//Twitter@LukeWasm
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